Big Threat? Payroll Companies Taking Insurance Biz Away From Agencies, Agents Warn

Insurance agents in Florida and beyond are finding that some of their toughest competition now seems to be coming from firms that aren’t really insurance agencies at all – at least not in the historical sense of the word.

“They’re not playing by the same rules as the rest of us,” said Tom Webb, founder and owner of Coastal Insurance Group, in Miami Springs.

He was referring to payroll and staffing firms, particularly those involved in the recently announced $4 billion merger of Paychex and Paycor, two of the largest payroll companies in the United States. That merger followed the 2024 acquisition of WorkForce Software by Automatic Data Processing, which is ranked as one of the largest payroll and employee management firms in the world.

While signing up businesses to supply workers or to manage their employee pay, taxes and benefits, the firms also often enroll the employers in workers’ compensation and other insurance coverage.

Through the years, many insurance agencies have partnered with payroll companies to provide commercial insurance for employers, Webb and other agents explained. But now, with the merger, Paychex seems to be pushing a growth plan – marketing insurance and “one-stop shopping” to more and more businesses, agents said.

“It’s a big threat to agents,” said Kyle Ulrich, president of the Florida Association of Insurance Agents.

The association has polled insurance carriers that write business with Florida agents and with payroll firms. The data suggest payroll companies are adding as many as 5,000 insurance accounts per month, Ulrich said.

“That’s 5,000 clients that are either having their agent of record changed or are purchasing workers’ comp through their in-house insurance agency, meaning retail insurance agents are losing 5,000 accounts,” he blogged recently.

One concern is that payroll firms may not know the finer points of insurance law and may not fully understand a business’ needs.

“The business owner thinks, ‘Great, the payroll company will handle everything,'” Ulrich said. “But they’re not as knowledgeable and may not give the best advice as an agent would.”

On workers’ comp, for example, the payroll company is “probably not going to know the Longshore and Harbor Workers’ Act and the Jones Act and all that,” said Webb, who has been in the business for more than 45 years. He was referring to federal laws that govern workers’ compensation for maritime workers.

And with underreported payroll and off-the-books workers a growing problem nationwide, payroll companies may not be concerned enough to verify construction subcontractors’ certificates of insurance, leaving laborers unprotected and employers vulnerable, Webb argued. He worries that the staffing firms will soon begin offering other lines of insurance to their clients.

Some agents also have griped that payroll companies may not have licensed insurance agents on staff when approaching business owners. The Florida Department of Financial Services records show that Paychex has its own insurance arm, Paychex Insurance Agency. The site shows agencies in nine Florida cities but lists just two licensed agents for all of those offices.

A Paychex representative said the company declined to comment or provide data on the number of insurance policies it sells to employers.

Webb and Ulrich said agents should communicate with business owner clients proactively about the potential problems. Owners may be able to opt out of insurance services from the payroll firms and can ask the firms to cancel or non-renew that part of the contract, they said. FAIA works with Heartland Payroll, formerly Ovation, to direct insurance coverage to local insurance agents when Heartland signs up businesses in Florida.

Not everyone on the agency side is so concerned about the growth of payroll companies and their insurance offerings. Lori Augustyniak, a Bradenton agent and president of Professional Insurance Agents of Florida, said competition from staffing firms has been around for years.

“One thing I have learned over the years is that you must be able to adapt your business to meet your clients’ needs,” Augustyniak said. “If you’re unwilling to adapt and change you could miss out on a great opportunity to take your business to the next level and possibly get left behind.”

She recommends agents partner with professional employer organizations to provide workers’ comp coverage to their client employers, or to sign agreements that provide a finder’s fee to the agency when producers send payroll and staffing business to the PEO.

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